US oil price slumps after pipeline cutback

US crude oil prices have closed sharply lower, dragged down by news that a key pipeline had cut capacity because of a bottleneck.

New York's main contract, West Texas Intermediate, for delivery in March, on Wednesday tumbled $US1.45 from Tuesday's close to settle at $US95.23 a barrel.

In London trade, meanwhile, Brent North Sea crude for delivery in March settled at $US112.80 a barrel, an increase of 38 US cents.

The New York market, which had been trading slightly lower for most of the session, dived after the operator of the Seaway pipeline told shippers that capacity had been reduced because of an unexpected problem at a delivery point.

"When that headline came out, the WTI immediately came under a significant amount of pressure," said Andy Lipow, an independent oil analyst.

The Seaway carries crude stocked in Cushing, Oklahoma, the main oil terminal in the world's biggest crude consumer, to refineries in the Gulf of Mexico.

Lacking sufficient pipeline capacity to bring oil to refineries, Cushing stockpiles have swollen recently to new record highs, weighing on futures prices.

Traders were keenly awaiting the US Department of Energy's latest weekly report on petroleum stockpiles. The data will be published on Thursday, one day later than normal, because of a public holiday on Monday.